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Are election fears spooking investors?

The UK is preparing for one of the most unpredictable general elections in recent decades, with none of the main political parties looking strong enough to return a majority come May 7th.

If a single party fails to earn enough seats to form a government on its own, there is a range of options open to the winner under current laws. A coalition between two or more parties is a possibility, while a minority government could also occur.

Polls show that Labour and the Conservatives – the two most popular parties – are nearly neck and neck going into the election. However, support for fringe parties such as UKIP and the Greens is higher than ever before.

In fact, there are so many possible outcomes that it appears the uncertainty is having an impact on investors.

Election impact on markets

The latest Hargreaves Lansdown March Investor Confidence survey showed that just 36 per cent of respondents believed the FTSE 100 would be higher in six months’ time. This is a notable decline from the 49 per cent who said the same in February.

Overall, the organisation’s index for measuring market optimism slumped 11 points from 105 to 94, it’s lowest level since September 2012.

“Respondents seem to feel a short-term dip in the UK stock market is a distinct possibility,” said Ben Brettell, senior economist at Hargreaves Lansdown.

“With the FTSE 100 breaking through the 7,000 barrier to set new record highs, and a general election looming large, investors are markedly less confident about the UK market’s short-term prospects.”

Of course, stocks are not the only option open to investors who are hoping to maximise returns, especially when market volatility is perhaps at its highest. Alternative investment classes, such as structures, can help clients alleviate risk by performing well in up, down and sideways markets.

Optimise your long-term investment strategy by considering structured investments and derivatives. Contact Affinity Capital today to learn more.

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